Demystifying Social Security How Does It Work? Benefit Adequacy

Transcription

1 Demystifying Social Security How Does It Work? Benefit Adequacy Presentation by Wilhelmina A. Leigh Senior Research Associate Studies 2012 Summer Academy National Academy of Social Insurance Barbara Jordan Conference Center Kaiser Family Foundation Washington, DC 11 July 2012

2 Average Social Security Benefits Monthly (December 2011) Annual (2011) Retired Worker $1,217 $14,604 Disabled Worker 1,111 13,332 Aged Widow(er) 1,184 14,208 Source: SSA, Studies 2

3 Assessing Benefit Adequacy compare annual benefit levels to federal poverty threshold examine the percentage of income that Social Security benefits constitute Studies 3

4 Social Security benefits exceed the federal poverty threshold for many. Size of Family Unit (Per Poverty Threshold Measurements) Weighted Average Poverty Threshold (2011) Corresponding Average Annual Social Security Benefits (2011) One person, under age 65 $11,702 Disabled--$13,332 Survivors -- 14,208 One person, 65 years and over 10,788 Retired-- $14,604 Two persons, with householder under age 65 Two persons, with householder 65 years and over 15,063 13,596 Studies 4

5 Social Security benefits also constitute the majority of income for many. Percent of Income from Social Security Beneficiary Units Ages 65+ (2010) SSA, Income of the Population 55 or Older, 2010, Table 9.A3 at Studies 5

6 Amount received in Social Security benefits is determined by many factors. whether credited for employment in covered occupations amount of earnings per quarter number of years worked eligibility age for full benefits marital status number of years benefits received Studies 6

7 Based on these factors, some are more likely to receive inadequate benefits than are others. For example, Factors Whether credited for covered employment Earnings per quarter Number of years worked Eligibility age for full benefits Marital status Number of years benefits received Example of Subgroups Likely to Receive Inadequate Benefits Farm workers Domestic workers Chronically unemployed; unpaid caregivers Persons affected by increase of eligibility age for full retirement benefits from 65 to 67 Never-married beneficiaries Oldest beneficiaries Studies 7

8 Inadequacy of benefits can be addressed at the same time that solvency is addressed for Social Security system. The report of the Commission to Modernize Social Security presents a set of revenue-enhancing options to guarantee fiscal solvency for the program that would also support the cost of increasing benefits for many recipients. Studies 8

9 Revenue-Enhancing Options (per Commission to Modernize Social Security) Increase the payroll tax rate Eliminate the wage cap and modify the benefit formula for high wage earners Enroll all new state and local government workers in the Social Security program For tax purposes, treat all salary reduction plans the same as 401(k) plans Studies 9

10 Options to Increase Benefit Adequacy (per Commission to Modernize Social Security) Increase benefits for recipients age 85 or older Increase benefits for widowed spouses Provide 5 years of child care credits Update the special minimum benefit Restore the student benefit up to age 22 Increase overall benefit level Studies 10

11 Conclusion The Social Security system provides a safetynet level of benefits for recipients. Thus, though average benefits are above the federal poverty threshold, benefits are not adequate to cover living expenses for all beneficiaries. Benefit adequacy and the system s fiscal health, however, can be enhanced simultaneously. Studies 11